Matthew Reed, chief executive of The Children’s Society, said: “With little savings to fall back on, it can take just one unexpected setback - like illness or being made redundant – to tip a family over the edge and into a debt trap that can feel impossible to escape from.”

A UK-wide survey found almost two and a half million children live in families owing a total of £4.8bn.

The research follows the launch of The Debt Trap, a campaign by The Children’s Society to expose the massive impact of debt on children’s lives.

The Children’s Society and StepChange Debt Charity are calling on governments to consider a ‘breathing space’ scheme to give families an extended period of protection from additional charges, further interest and enforcement action.

They also want a review of whether the protection for children against the harm caused by debt collection – including evictions, bailiffs and court action – is working. And the groups are calling for earlier and wider access to debt support and tighter restrictions on advertising loans to children.

Mike O’Connor, chief executive of StepChange Debt Charity, said: “As parents become trapped in a toxic cycle of debt, children can become the unwitting victims. This is not acceptable in a society that aspires to justice and fairness.

“We need concerted action to ensure financially vulnerable families are given ‘breathing space’ to help them get back on their feet and protect both children and families from the most harmful effects of debt.”

A Welsh Government spokesperson said the recession and the UK Government’s “unfair” welfare reforms are hitting the most vulnerable.

“In 2013/14, the Welsh Government provided funding of more than £1m to organisations in Wales to provide advice on debt, housing and benefits.

“Credit Unions also play a key part in our plan to tackle poverty and help mitigate the impact of the UK Government’s welfare reform by offering low cost financial services to families across Wales,” said a spokesperson.

A Wales Office spokesperson said: “The UK Government’s long term economic plan is working, delivering the fastest growing economy in the G7 and more people in work than ever before.

“The only way to secure rising living standards is to fix the economy. That’s why this Government is backing businesses and hardworking families by reducing energy costs, freezing fuel duty and lowering job taxes - lifting 155,000 low income people in Wales out of income tax altogether.”

The findings were based on the most recently available insolvency statistics and a survey of 91 Welsh families with children among 2,000 across the UK.

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